Report: Ex-vendor owes state over $700,000

LITTLE ROCK — A vendor that the Arkansas Department of Health hired to provide trauma training for hospitals, doctors and nurses owes the state about $730,000, according to an audit report.

According to the report by Arkansas Legislative Audit, presented Friday to the Legislative Joint Auditing Committee, the Arkansas Trauma Education and Research Foundation was formed in June 2011 to fill a training need that was created when the Legislature and then-Gov. Mike Beebe approved legislation in 2009 to create a statewide trauma network.

The Health Department’s contract with ATERF called for the agency to reimburse the organization only for actual costs, but auditors found that the agency reimbursed ATERF for estimated costs instead, resulting in the agency being overbilled $655,886.

The contract also provided that equipment acquired by ATERF would be state property, but in fiscal 2015 ATERF sold a piece of equipment for $45,000 without the Health Department’s knowledge. ATERF had bought the item in fiscal 2012 for $74,350.

Auditors also found that ATERF conducted leadership conferences in August 2013 and August 2014 at an out-of-state, high-end resort, even though most of the attendees were from Arkansas.

Also, in apparent violation of the state’s conflict of interest law, two members of the state Trauma Advisory Council received about $142,000 from ATERF for teaching and/or planning courses, and ATERF’s chairman was paid $50,375 by ATERF for participating in the council’s meetings — an amount that the Health Department reimbursed.

In February, the Health Department told ATERF it would not make any more contract payments until the organization provided information and documentation the agency had requested. ATERF did not comply with the request, according to the report.

In April, ATERF requested changes to its contract that would have included a higher cost for an upcoming conference. The Health Department did not approve the changes, but ATERF held the conference anyway in May, and it later asked for reimbursement, which was not approved or paid. Vendors are still owed $115,380 for the conference.

The Health Department notified ATERF in May that it would not renew the contract, and in the summer the organization ceased operations. The audit was conducted after the agency reported the problem to auditors.

Robert Brech, general counsel for the Health Department, said one vendor that was not paid by ATERF has filed a complaint against the agency. He said the agency will contest the claim and said that if ATERF declares bankruptcy, the vendors it owes money to should be able to receive a share of the bankruptcy estate.

Brech said some of the most egregious expenses ATERF ran up include $750 for alcoholic beverages and $1,500 for s’mores at a conference that a little over 100 people attended. Receipts show that 200 to 300 people were fed, he said.

“Obviously, they were paying for meals families, for the complete families of everybody who went,” he said.

Lawmakers asked what steps are in place to make sure something similar does not happen again.

Health Department Deputy Director Ann Purvis said the agency is requiring employees to receive ongoing technical training from its audit staff and has ordered random internal audits “so they know that they’ll be accountable for these types of mistakes and errors in the future.”

The staff people who worked with ATERF are no longer with the agency, Smith said.